Opportune time to tweak tax policies to help vulnerable groups

THE Committee on the Future Economy has identified seven strategies for Singapore to stay ahead and achieve sustainable economic growth in a challenging global climate. One key message of its report is the need for our people to possess deep skills and be inspired to learn throughout their lives as they deal with the rapid pace of technological development and constant disruptions in the future economy. The ultimate goal is for the fruits of our growth to be enjoyed by all Singaporeans as we continue to strive to be an inclusive society.

In line with the inclusivity theme, Budget 2017, to be unveiled on Feb 20, can introduce new initiatives or tweak our existing tax policies to help certain vulnerable groups of individuals. To this end, I have seven recommendations.

First, for retrenched workers who have lost their jobs and take time to find new ones, we should not tax any form of retrenchment benefits that are paid to lay off such workers, so long as the amounts involved are reasonable. Our current tax policies tax salaries in lieu of notice as well as any gratuities paid in recognition of the employees' past service. Only the lump sum portion of a retrenchment benefit package that compensates a retrenched worker for the loss of office is exempt from tax. As retrenched workers may be out of job for prolonged periods, they need to rely on these last payments from their employer to tide them over a difficult period and the last thing that should happen to them is for their cash positions to be eroded by taxes.